I've been interested of late in the Case-Shiller approach to valuing real estate growth in the US. As opposed to the http://www.ofheo.gov/ site where the US Government provides real estate data, the Case-Shiller uses paired sales, meaning they record when a house is purchased, and then when it is sold, divide by the number of years and come up with the real actual rate of growth for those properties. Most importantly, they do all property sizes, whereas the OFHEO site provides data only on conforming properties, further skewing the real impact of declines in higher property value markets.In a recent report they shared that residential real estate held by households and non-profits reached $22.4 Trillion, great than the $19.3 Trillion held by the same group in domestic stocks. This isn't net wealth inside the house, which is now around $13 Trillion after subtracting for mortgage liabilities, but we're seeing how big an impact house wealth and mortgage borrowing has on our U.S. financial and psychological fitness. The Case-Shiller index is seeking to better compare an investment in your house to other stock, bond and fixed income investments, and they recently put out a detailed report on their Forecast, which is recapped below for your review:
Forecast Summary
The current housing recession is expected to run through early 2009 and will ultimately be severe enough to be characterized as a housing crash. Home sales are exptedted to hit bottom in early 2008, declining by over 40% from their peak, housing starts will reach their nadir in mid-2008, falling by 55%, and house prices are expected to decline by 12% through early 2009. After accounting for the plethora of non-price discounts home sellers are offering to buyers, effective house-price declines peak to trough will total well over 15%.
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